What are qualities of good investment?

Answer 1

Here are some pointers that you might want to take note the next time you screen through your investment options.

1. Compare your yield with other investments

Remember to annualize your returns to see if your short term investment is worthwhile. Do take note that compounded returns (eg. monthly 1%) is far greater than a yearly returns (eg. yearly 12%).

2. Is there a lock in period?

Ask yourself if you would be cash tied in your investment, or if you would need the money elsewhere. Not being able to channel your funds also presents opportunity risk. Zero lock in period would usually mean a better short term investment.

3. What are the risks (for it being a short term investment)?

Take stocks for example. Even value investing in stocks presents short term volatility risks. If you are not able to stomach such returns, then it may not qualify for your suitable short term investments.

4. Are you able to withdraw your profits anytime?

This is important. If your monthly returns is 3% and it takes you 1 additional month to make a withdrawal of your profits, then you would have effectively gained only 1.5% profit per month. If you want to find a good short term investment, then your money has to be liquid.

5. Your experience in the investment

How familiar are you with the investment? If you have no expertise in it, then you are better off seeking investments that provides professional advice and support.

6. Tight control of the risk and returns

Are you able to adjust your risk levels based on the market condition and risk appetite? Especially in the short term, it's important for you to be able to do so.

7. Boring investments

This is the most important point you will see today. Make your money work for you when you invest. If your investment requires you to monitor it on a daily basis, or hourly basis, then you are actually working for money. Find a short term investment that allows you to sleep peacefully at night without worrying about your money.

8 .Risk << Rewards

Does the rewards justify the risks that you are taking? If you feel uncomfortable about the investment, then it's best that you stay away.